A new study finds the Palestinian economy in 2009 improved slightly, but continued to perform well below its potential. The report says rehabilitation of the Palestinian economy requires a complete lifting of all Israeli restrictions in the West Bank and Gaza. The U.N. Conference on Trade and Development has issued its annual Report on Assistance to the Palestinian People.

The UNCTAD study estimates gross domestic product climbed by 6.8 percent in the occupied Palestinian territories in 2009 and the unemployment rate declined by 1.6 percent.

UNCTAD Coordinator of the Assistance to the Palestinian People Mahmoud Elkhafif says these cited statistics sound good on paper, but adds the reality is no cause for optimism.

"Over the last 10 years, the income per capita, or GDP per capita, is 30 percent below what the Palestinian, average Palestinian used to have 10 years ago. So, when we say 6.8 percent growth, that seems O.K., but when we see that there is a 30 percent decline in real GDP per capita, that is an alarming figure," said Elkhafif. "When we also see that 30 percent of the Palestinian in the West Bank and Gaza are unemployed, that is also alarming."

The report says the economic and humanitarian situation continues to worsen. It says poverty persists and food insecurity affects more than 60 percent of the population in Gaza and 25 percent of the population in the West Bank.

UNCTAD economists note the private-sector revival continues to be hampered by Israeli movement restrictions both within the Occupied Palestinian Territories and at border crossings.

It says the situation in Gaza is far worse than in the West Bank. It says the so-called "tunnel economy" and informal economy in Gaza has greatly expanded to compensate for the collapse of the productive sector.

As a consequence, Elkhafif says, the Palestinian trade deficit worsened to 59 percent in 2009.

"But, what is more alarming is the extreme dependency on the Israeli economy. Three-quarters of the Palestinian trade is with Israel," Elkhafif said. "As a result ... the total Palestinian trade deficit with Israel was about $2.6 billion in 2009. This is about seven-percent higher than the $2.4 billion received by the Occupied Palestinian Territory from the International Community."

The report agrees fiscal reforms aimed at narrowing the public deficit can be important policy goals. But it warns they should not be pursued at the cost of increasing the poverty and misery of the Palestinian people.

The report says the Palestinian economy would improve substantially with the lifting of the Israeli blockade of Gaza and the closures in the West Bank. It says relaxing these barriers would produce 60,000-80,000 more jobs a year.